Why natural gas prices are falling

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Why natural gas prices are falling

Sam Boughedda

Wed, February 18, 2026 at 12:02 AM GMT+9 1 min read

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+0.67%

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-5.92%

Investing.com – Natural gas prices have dropped sharply this month, a move Morgan Stanley links to milder late-February weather and a rapid recovery in supply following Winter Storm Fern.

Analyst Devin McDermott wrote in a note to clients that prices “have pulled back ~29% so far in February alongside a milder shift in weather,” adding that the recent reversal in heating demand has been a major factor.

Morgan Stanley believes the broader supply-demand outlook into summer “still skews constructive,” but warned that a sharp pickup in drilling in the Haynesville has introduced new risks.

The firm noted that the basin’s rig count “is up +10 in the past month to 52,” which is now “~10% above our est of what the market needs this year.”

According to the note, this rise in activity has helped push Lower 48 dry gas production to “approximately 107.9 bcf/d month-to-date, up 1.5 bcf/d versus the January average.”

The bank also pointed to a notable swing in weather conditions. After a late-January cold snap briefly lifted Henry Hub to “~$7/mmbtu,” Morgan Stanley said weather has “flipped milder,” with heating degree days running around 9% below the 10-year average. Prompt Henry Hub has fallen back to roughly $3.10.

LNG feedgas demand has recovered quickly, and Morgan Stanley continues to expect “~3.8 bcf/d of LNG growth in ’26,” including an early March start for Golden Pass. But the combination of rebounding supply and a softer February has created a more mixed picture.

Even so, the firm said weak hydro conditions in the western U.S. could boost gas-fired power burn by “~0.5 bcf/d” this summer, offering some support later in the year.

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